With the NHLPA offering massive concessions, why does the league continue to push for more? Simple: there is a financial case for doing so.

It has been suggested – by fans, by media, and certainly by the players – that NHL commissioner Gary Bettman is a fool for continuing to push for this lockout. With the season-ending 2004-05 lockout still alive and well in recent memory, and occurring on Bettman’s watch, he has earned the loathing of many.

The emotional response is understandable. But a fool Bettman isn’t. It is well worth remembering that the league got its money’s worth out of the last lockout in the form of massive reductions in the amount of money the players received. A lost season was ugly, but it had no lasting negative financial impact on the game as a whole and the additional money the owners made justified the decision financially.

In my estimation, Bettman is precisely the opposite of a fool: a cold, hard, businessman carefully weighing the dollars and cents of every decision he makes. Those decisions, which have led to the current lockout, may hurt fans, players and the game, but ultimately they will favour the financial interests of his constituents: NHL owners.

The league may have made $3.3 billion last season, but that’s not the money the owners have at stake. The owners are actually risking just their 43 percent share of that $3.3 billion: $1.42 billion, give or take. That still represents a significant chunk of change, but then they are not gambling all of it in one go either.

Until the middle of October, Bettman was playing with mostly house money. An 82-game season, starting early in November, was still possible. Sure, the preseason would be lost, but that represented a small enough share of owner revenue that it was not a primary concern. Bettman learned the lessons of the last lockout – that teams were affected more or less equally, and that fans would return quickly – so concerns about lasting damage to the popularity of the game are likely minimal.

With minimal long-term concerns, but now with each day costing the owners money, how does Bettman decide when he has a good deal? Because he is the rarest of things – a rational decision-maker – it seems likely that he makes a simple calculation that decides for him. The calculation?

Will I make the owners more money over the term of the next collective bargaining agreement by a) agreeing to a deal at the best terms I can get now or b) by pushing for more concessions and making a deal further along in the process?

What would that calculation look like?

The majority of NHL revenue is made in the regular season – the playoffs, which have less than 100 games each year (though ticket prices are increased for those games), are a significant but comparatively small portion of overall NHL revenue. Even assuming the NHL makes twice as much money per playoff game as it does per regular season game, the sum revenue of the playoffs only comes in at a little over $200 million. Including the preseason (with revenues of less than $100 million) and we’re talking about roughly $3 billion in total NHL revenue – 90 percent – coming from the regular season. That’s a rough estimate, but it’s good enough to illustrate the point of the calculation above.

Every 2.2 days, give or take, the NHL loses a regular season game from the schedule. For every month lost to lockout, starting at some point in early November, that’s 14 games lost. That means each month burned cuts roughly half a billion dollars from the revenue pot that the owners and players share (17.1% of the season multiplied by ~$3.0 billion). I’d be surprised if Bettman and the owners (as well as Fehr and the NHLPA, for that matter) didn’t have a more exact figure in their minds each day they negotiate.

Of course, the owners aren’t losing $500 million. The league as a whole is. Right now, with the players likely getting 54.3 percent of that (based on Bob McKenzie’s recent calculation) a month lost costs the owners in the neighborhood of $230 million in revenue.

There is an additional wrinkle. The owners, unlike the players, incur costs when the season is in session, as a big chunk of that money goes toward putting the games on. While some items are deducted from general revenue rather than from the owner’s side, there’s no question that each month costs them significantly less than our calculation. The players, on the other hand, lose the entirety of their share with no prospect of getting it back – $270 million per month, or thereabouts, this year.

Even using that full monthly figure of $230 million, it does not take many concessions on the players’ part to justify losing that money. For Bettman to justify losing that money, he needs to make back just $38 million per season over a CBA with a six-year term. That figure drops to $33 million per year over a seven-year CBA (I suspect that this is the reason the NHLPA pushed early for a short-term CBA – a short-term CBA reduces the NHL’s incentive to push for the best possible deal because they would have less time to make back the money they managed to extract from the players, making any loss of revenue harder to justify).

Taking morality out of the equation – while I’m not especially thrilled with the league imposing its will on the players, this is business between two very rich parties and should be viewed as such – and it’s easy to understand where the league is coming from. The players have much more money at stake than the owners do. There’s a sound financial case for the league to continue to push hard for its objectives.

The question is whether the players are operating using the same sort of model. As we’ve seen, a difference of even $40 million/season over a six- or seven-year CBA is likely enough to justify continued negotiations, even on the players’ side. But they are losing money faster than the owners, and because of that it will make financial sense for the union to cave far quicker than it will for the league.

For those hoping for a quick end to this lockout, the hope lies with Donald Fehr and the NHLPA, not with Gary Bettman and the NHL. Fehr’s constituents are more apt to rebel than the owners – there are more of them and despite Fehr’s superb work in unifying the NHLPA he is simply playing with an inferior hand. More than that, though, if Fehr is working in the best interests of his constituents it will make financial sense soon (if it doesn’t already – with the cone of silence that has descended on talks it is impossible to know for sure) to make the best available deal and bring this lockout to an end.

It is also in Fehr’s interests, however, not to act in a purely rational manner. The NHLPA’s only threat is mutually assured destruction: that they will take as much punishment as is necessary to get what they want, and even though that hurts them more than the owners, the owners’ financial interests will be hurt, too.

It is an ugly dynamic; it is also the reason why this lockout continues despite the fact that the collective interest of both parties would have been best served by a deal that saved the full NHL season. Unfortunately, as we’ve seen, the collective interests of both parties are not what either side is fighting for.

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